McIlvaine: China to have major impact on cost of environmental, energy investments

NORTHFIELD, IL, July 16, 2009 -- McIlvaine research concludes that, whether it's consumables such as activated carbon or SCR catalysts or whether it's big equipment such as reverse osmosis systems or wind turbines, it will be Chinese activity which determines the price...

NORTHFIELD, IL, July 16, 2009 -- Whether it's consumables such as activated carbon or SCR catalysts or whether it's big equipment such as reverse osmosis systems or wind turbines, it will be Chinese activity which determines the price. This is the conclusion reached by the McIlvaine Company based on the forecasts and demand analyses conducted in each of its market reports on water, air and energy subjects.

The reality is that a power plant in the U.S. should plan its catalyst purchases based on two factors. First, the demand in China will be larger than the present world capacity. This will increase cost in the short-term. Secondly, there will be new Chinese suppliers entering the U.S. market which will decrease price in the longer term.

The U.S. has averaged 10,000 megawatts (MW) per year of new SCR NOx control systems since 1991. The total world outside China has managed to only install 300,000 MW of these systems since 1980. China plans to install 400,000 MW by 2020 and they have in a few years installed more MW of SCR than any country other than the U.S. By 2020 the Chinese catalyst need will be 25 percent greater than the present world manufacturing capacity. By 2012 Dongfang and Sino Environment will have combined manufacturing capacity in China of 23,000 m³ but this will be only 15 percent of the 2020 requirement.

In 40 years the world outside China has managed to install 382,000 MW of flue gas desulfurization scrubbers. In less than a decade China has installed 326,000 MW. By 2020 China will be operating 658,000 MW of FGD Systems. This means that it will require twice the limestone used in plants outside China today. It will need to buy more slurry pumps, nozzles, and agitators than are used in FGD systems outside China today.

The installation of wind turbines in China is quickly exceeding the most optimistic predictions. Nearly 10,000 MWs of new capacity is being installed every year. Since the typical turbine installed in China is under 1 MW, this means over 10,000 gearboxes, wind turbine blades, etc. will be needed each year. In just a few short years China has not only planned and installed many large wind farms but they have also developed a large China-based industry. It is expected that they will shortly become an exporter of wind turbines and components.

Within two years it is predicted that China's installed capacity will exceed any other country in the world. This high level of activity will result in the shortage of some raw materials. On the other hand, the development of the domestic supplier industry will soon lead to a significantly increased international turbine supply capability and promises to bring down the longer term turbine costs.

China is also a major player in many of the water segments. With its arid climate and contaminated freshwater sources, desalination is playing a big role. The Chinese stimulus package is already accelerating the largest wastewater treatment effort of any country.

In the coming years the cost and availability of environmental and energy products and systems will be increasingly influenced by China. For more information on the various McIlvaine reports on air, water, and energy click on: www.mcilvainecompany.com.

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